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Chrisman's Corner: What Is Moving Markets?

China has been all over the news lately. (If you would like to watch a 3 minute clip of Donald Trump saying nothing but the word “China” check out the Huffington Post.) But the simple fact of the matter is, China affects us in so many ways, and thus what happens there moves interest rates and rates for JMAC’s clients and their borrowers. 
 
We owe China trillions of dollars, we do a large majority of our trading with them, every other item you pick up says “Made in China” and now, decisions they make affect our economy. China is a big part of our everyday lives and now with them devaluing their currency, sending out stock market through a volatile whirlwind, they are a part of our lives more than ever. 
 
This market volatility comes not only from China devaluing its currency but they are also changing the ways of their economy entirely. The Chinese central bank is showing implications of reverting to what is known as “sledge hammer currency actions,” leaving behind the free market economy approach. China had its currency attached to the US dollar for many years, which was viewed as a means of keeping the value of the yuan artificially low and Chinese goods cheap. But recently China formed a group and attached its currency to multiple currencies where the value has been allowed to float a bit more freely.
 
The issue with that however, with a slowing economy, China has stepped up efforts to weaken the currency even more than has naturally occurred with the change in exchange strategies. 
 
The upcoming policy tightening by the Federal Reserve that is expected to happen this month may not occur until later in the year due to volatility in the markets. In addition to interest rates, any businesses that import or export and that have borrowers working with JMAC brokers will be affected. American made goods, finished or otherwise, will be more expensive and less competitive as the US is even more of a safe haven than before. Imported goods will be less expensive, which will benefit some businesses.